2002 (7) TMI 764 - HC - VAT and Sales Tax

Summary

Issues:
Challenge to Exhibit P6 and P7 proceedings of the Sales Tax Officer, interference with recovery proceedings, legality of revised assessment under section 19, interpretation of the amended provision, retrospective effect of the amendment, applicability of time limitation, comparison with a Supreme Court decision.

Analysis:
The petitioner challenged Exhibit P6 and P7 proceedings of the Sales Tax Officer, seeking intervention by the court in the recovery proceedings. The petitioner, a dealer of Indian-made foreign liquor, was subjected to tax liability for the assessment year 1993-94 based on Exhibit P1. Subsequently, a notice under section 19 was issued, alleging under-assessment due to escaped turnover. Despite objections, a revised assessment (Exhibit P6) was conducted, determining a fresh turnover and demanding additional tax with penal interest (Exhibit P7). The petitioner contended that Exhibit P6 lacked legal authority and should not be enforceable. The court refrained from delving into the merits of this argument, focusing instead on the interpretation of the law.

The department relied on the amended section 19, effective from April 1, 1998, allowing assessment of escaped turnover within five years from the relevant year. The petitioner's assessment for 1993-94 fell within this timeframe, enabling the department to initiate proceedings. However, the counter-affidavit mistakenly referred to an amendment from April 1, 1994, which was incorrect. The court clarified that the petitioner's assessment period had expired by March 31, 1998, rendering the department's actions invalid under the amended provision introduced in 1998.

Citing a Supreme Court decision (S.S. Gadgil v. Lal and Company [1964] 53 ITR 231) regarding a similar provision in the Income-tax Act, the court emphasized the importance of time limitations in assessments. The Supreme Court case illustrated that amendments with retrospective effect have limitations, and proceedings must align with the statutory timeframes. Applying this principle, the court concluded that the department's right to proceed under section 19 against the petitioner had lapsed by April 1, 1998, rendering Exhibit P6 null and void for lack of jurisdiction.

Consequently, the court set aside the reassessments and penalty proceedings, ruling in favor of the petitioner. The original petition was allowed, and the consequential proceedings were closed. The judgment highlighted the significance of statutory limitations and the retrospective application of legal amendments in tax assessments, ensuring adherence to procedural fairness and legal boundaries.